A structural model of segregation in social networks
AbstractIn this paper, I develop and estimate a dynamic model of strategic network formation with heterogeneous agents. While existing models have multiple equilibria, I prove the existence of a unique stationary equilibrium, which characterizes the likelihood of observing a specific network in the data. As a consequence, the structural parameters can be estimated using only one observation of the network at a single point in time. The estimation is challenging because the exact evaluation of the likelihood is computationally infeasible. To circumvent this problem, I propose a Bayesian Markov Chain Monte Carlo algorithm that avoids direct evaluation of the likelihood. This method drastically reduces the computational burden of estimating the posterior distribution and allows inference in high dimensional models. I present an application to the study of segregation in school friendship networks, using data from Add Health containing the actual social networks of students in a representative sample of US schools. My results suggest that for white students, the value of a same-race friend decreases with the fraction of whites in the school. The opposite is true for African American students. The model is used to study how different desegregation policies may affect the structure of the network in equilibrium. I find an inverted u-shaped relationship between the fraction of students belonging to a racial group and the expected equilibrium segregation levels. These results suggest that desegregation programs may decrease the degree of interracial interaction within schools.
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Bibliographic InfoPaper provided by Centre for Microdata Methods and Practice, Institute for Fiscal Studies in its series CeMMAP working papers with number CWP32/10.
Date of creation: Nov 2010
Date of revision:
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Other versions of this item:
- Angelo Mele, 2010. "A Structural Model of Segregation in Social Networks," Working Papers 10-16, NET Institute.
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-18 (All new papers)
- NEP-NET-2010-12-18 (Network Economics)
- NEP-SOC-2010-12-18 (Social Norms & Social Capital)
- NEP-URE-2010-12-18 (Urban & Real Estate Economics)
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